What is the biggest advantage of VC versus other sources of funding such as a bank loan, own funds, etc

Ans: To become an investor into start-ups, you first need to have investible surplus that you can afford to lose without losing any sleep! It is a high risk activity involving patient capital; further it is illiquid and returns are uncertain. It is essential to understand that. Some investors also like to play an active role in some of the start-ups they invest in.
How do they find businesses to invest in? By being close to the places which start-ups frequent. It could be incubators, accelerators, entrepreneur facilitation bodies, associations etc. Many investors become part of angel networks, syndicates etc to understand how other experienced investors evaluate and invest in start-ups. It would be good for you to speak to a couple of experienced investors and financial advisors before you embark on this journey

Ans: Sole proprietorship, by its very definition, implies a single owner. You will need to convert it into a private limited company to attract other shareholders/ investors. To become investment-ready is a different ball game. It would be good for you to attend local entrepreneur association meets like TiE or become part of an incubator.

Ans: Outside professional investors don't invest in sole proprietorships or partnerships. It would be good for you to become a member of an entrepreneur association in your area or become part of a business incubator which can help you get mentors and give you other kinds of learning